| Want to discuss a nightmare? Foreclosure, | | | | But this option so often leads to disaster because |
| eviction, or repossession may be at the top of | | | | the terms of the second loan are usually far |
| the list. What is involved in foreclosure, eviction, or | | | | more stringent. Getting a second loan then usually |
| repossession? How long does the process take? | | | | only delays the inevitable which is foreclosure. |
| Does a consumer have recourse? | | | | Eviction |
| Foreclosure | | | | When rent is not paid, the landlord has the right to |
| Foreclosure can take from 6-18 months to wrap | | | | force the renter out through the eviction process. |
| up depending on state laws and the homeowner | | | | Eviction varies greatly from state to state and by |
| circumstances. | | | | city ordinance. The process can take just two |
| If you have missed one or two payments, the | | | | weeks in some locals and in other areas up to |
| creditor will write you a letter requesting payment | | | | two months. But the first step in the process is |
| of the outstanding amount plus a penalty of 5 % | | | | the "Notice to Quit" or "Notice to Vacate". It |
| or so of the monthly payment. If the consumer | | | | simply tells the renter to pay up or vacate within |
| ignores these communications, a formal notice | | | | a limited period of time. Hidden within this notice is |
| called "Notice of Default" is sent. This is the first | | | | the right of the tenant to remain if the amount is |
| official step in the foreclosure process. The | | | | paid. |
| consumer at this point has 90 days to correct | | | | If the obligation is not met, the landlord can file an |
| the default or "cure" the debt by making all back | | | | eviction order with the court. A hearing is then |
| payments plus penalties. | | | | issued and a summons issued for the tenant to |
| If the back payments are not made up or | | | | appear in court. If the tenant does not appear, |
| contact not made, a second formal notice is sent | | | | the landlord gets a default judgment. If the tenant |
| by mail. This is the "Notice of Acceleration". | | | | is not out by the required date, the tenant's |
| Basically what this mean is that the total amount | | | | belongings can be put on the street. Additionally |
| owed is now due and payable to avoid | | | | the landlord can then sue for all unpaid back-rent. |
| foreclosure. Some states require an actual court | | | | If there is a lease, the tenant is legally bound to |
| order to remove the consumer from the house | | | | pay all future months until the end of the lease. |
| delivered as a summons. At court the consumer | | | | If the renter is having trouble paying the rent, |
| can raise a defense to try to overturn the | | | | contact the manager immediately. Perhaps |
| foreclosure. If the homeowner does not respond, | | | | something can be worked out. But doing nothing |
| a foreclosure judgment is rendered and a "Notice | | | | can be disastrous as shown above. Even if |
| of Sale" is sent to the house with the date and | | | | evicted, the tenant should attend the hearing to |
| time the foreclosure is in effect. | | | | insure the amount of back rent is correct and to |
| Avoiding Foreclosure | | | | offer any mitigating circumstances. Tenants |
| Obviously avoiding foreclosure means staying up | | | | cannot be locked out nor have their property |
| with mortgage payments and taxes. But what if a | | | | seized without a court order. Also landlords cannot |
| person can't? The first course of action is to | | | | evict in retaliation for reporting sub standard |
| make contact with the mortgagor and ask for a | | | | housing conditions. |
| temporary or even permanent reduction of the | | | | Auto Repossession |
| interest rate or even a short-term moratorium on | | | | A default can occur with any missed contracted |
| the payment. But if this cannot be done, there | | | | installment payment. The lender can then seize |
| are other options depending on whether the | | | | the property. In the case of a car, the lender can |
| condition is temporary or permanent. | | | | put a lien and sell it to regain the loss. Some |
| If the condition is only temporary, it is possible to | | | | states require a Notice of Default to be sent. |
| obtain a "Mortgage Workout" as described below. | | | | Other states do not and a car buyer may not |
| However, if the conditions are long term, it may | | | | even know they are in default. Especially in these |
| be wiser to sell the home before a foreclosure | | | | cases, it is critical to keep track of payments on |
| sale when the owner has no control. | | | | secured loans. |
| But if the mortgage payment is only temporarily | | | | A reposed vehicle can be seized but only without |
| difficult, the homeowner can negotiate a workout | | | | confrontation. However, a car can he hot-wired, |
| with the mortgagor for an easier schedule. This | | | | opened with a duplicate key, removed from an |
| can be either permanent or for the short term. A | | | | open garage and in some states even removed |
| common workout is to "cure" the default by | | | | from an unlocked garage. |
| adding a percentage of the mortgage in arrears | | | | It may be possible for a very short time to |
| to the regular payments until the debt is current. | | | | regain the automobile but the lender is not |
| "Recasting" is another option. If the homeowner | | | | required to provide this option. Normally a |
| can make the current payments but cannot | | | | repossessed auto is sold at an auction block and |
| handle the past due amount, the arrears can be | | | | the difference between the amount owed on the |
| deferred or "recast" so that this amount can be | | | | balance and the selling price becomes the |
| paid at the end of the contract. Today workouts | | | | obligation of the former owner. The remaining |
| of up to thirty-six months are common. | | | | balance is known as the "Deficiency Balance". |
| Often a second loan is procured to pay the first. | | | | |